Chinese Banks would benefit from disclosed environmental policies

April 1, 2008

Banktrack has released an interesting report on the environmental performance standards of China’s financial institutions. The report recognises the need for policies to be put in place, as China’s financial institutions are becoming important players in financing environmentally and socially sensitive activities around the world.

The report found that:

Only two of China’s ten most important banks — China Development Bank (CDB) and the Export-Import Bank of China (Chexim) — have publicly-disclosed environmental policies…   … The rest of the eight banks surveyed had no publicly-available environmental financing standards.

There are also some encouraging sign that suggest progress is being made:

The Peoples’ Bank of China has recently developed a new credit database which includes borrowers’ environmental compliance data. This will allow Chinese banks to evaluate how well companies have followed environmental laws before offering loans.

The report also claims that many international banks, who own significant shares of Chinese banks, have the ability to institute world-class environmental standards through their strategic investment agreements. This is another example of the growing environmental demands being placed on international banks, and there needs to be careful consideration as to whether the demands are reasonable and if there is genuine scope for influence.

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Equator Principles Signatories: Progress with Disclosure

January 12, 2008

The Equator Principles website now has a “disclosure section” which provides information on how the EP signatories are progressing with their annual disclosure reports.

Disclosure Reports

The progress made by the 56 EP signatories on the 13 December 2007 was as follows:

  • 33 – Reported (including some in the 1st year grace period)
  • 10 – In the 1st year grace period
  • 9 – No information made available
  • 4 – Will report soon

It is encouraging to note that EP signatories in their 1st year grace period are producing disclosure reports. A few of the signatories clearly need to get on and prepare their report in order to comply with the requirements of Principle 10 . This section provides a valuable addition to the EP website with useful links to the available disclosure reports.



CSR in the Australian banking sector – Westpac

January 29, 2007

Westpac has released its sixth non-financial Stakeholder Impact Report, available at www.westpac.com.au/corporateresponsibility.

The 2006 report is based on the ‘G3’ GRI guidelines, and sets out Westpac’s extended performance in building human, social and environmental capital. It also includes contributions from a number of thought leaders, suppliers and community advocates.

In the past year, Westpac has:
point Committed to the revised Equator Principles – the only Australian bank to do so;
point Launched two new ‘green’ products: the EcoNomical Home Loan and the Westpac Landcare Term Deposit account;
Continued to reduce greenhouse gas emissions –cutting emissions by over 45% since 1996;
point Contributed a total of AU$47m to the community, 1.4% of pre-tax profits; and
point Celebrated 30 years of partnership with Surf Life Saving Queensland.

The report again emphases the links between sustainability and shareholder value, with Westpac CEO, Dr David Morgan, stating that managing social, environmental and workplace performance, along with stakeholder relationships and other intangibles, is fundamentally linked to long-term shareholder value.


Key discussions at the Ethical Finance Summit

December 5, 2006

There were some excellent discussions on the Equator Principles (EP) at the Ethical Corporation – Sustainable Finance Summit. The main hot topics were:

  • The need to manage the success of the principles. The need to prevent their extension to areas other than Project Finance weakening the brand, due to insufficient leverage in such areas.
  • The EP’s have lead to an unprecedented level of collaboration by Financial Institutions.
  • There is a lack of mechanisms for demonstrating how the adoption of the EP’s have contributed to business performance and financial benefits, but despite this FI’s are see these issues as key to their core branding.
  • There is a need for a pragmatic approach to their application, in certain situations when good project sponsors and FI’s have turned down projects with high potential environmental and social risks, the projects have been progressed by weaker parties and consequently developed more severe environmental and social problems.
  • There is a need to manage expectations about what the EP’s will achieve – e.g. they have not been established to be a tool for equity.
  • There has been a lack of developing market banks and a notable absence of leading French Banks adopting the EP’s.
  • The need for sufficient lead in times to review Finance deals to avoid situations where problems are picked up too late on a project to enable compliance.
  • Some banks are striving to be leaders in sustainability, while others believe the EP’s have created a level playing field.

Sustainable Finance Summit 2006

November 15, 2006

I will be attending this event at the end of November, and I hope to see all those of you who are interested in this topic there. This will be a key event for all practitioners in this area, and will provide an excellent forum to share best practice. I’ll be posting feedback after the event, so if you don’t make it, come back here and catch up on what you missed.

Sustainable Finance Summit 2006

Recognition of the key role of financial institutions in stable and sustainable development has come. This leading-edge conference will show the way forward on these difficult, but essential issues. As banks go truly global, many for the first time, they are entering and whole new world of trust, risk – and opportunity – that must be well managed.

The newly revised Equator Principles now represent some 85% of global project finance , and that percentage is going up almost daily.

How banks can manage both profit and sustainability will be addressed early on by Jon Williams , a leading thinker and practitioner who is also Head of Group Sustainable Development at financial behemoth HSBC Holdings.

Among those speakers will be:

F&C Investments * The Co-operative Bank * Standard Chartered * FTSE * Barclays * ABN AMRO * HSBC Holdings * UBS Investment Bank * Wall Street Journal * Financial Times * KLD Research & Analytics * Henderson Global Investors

 


IFC Launches Lessons of Experience on BTC and Chad-Cameroon Pipeline Projects

October 30, 2006

The International Finance Corporation (IFC) has launched two new Lessons of Experience publications on “The BTC Pipeline Project” and “External Monitoring of the Chad-Cameroon Pipeline Project.” The publications provide key environmental and social lessons and good practices for the benefit of staff, clients, and the wider private sector.

The sharing of project experience is an exemplary approach to risk management, it is excellent to see the IFC sharing their findings and contributing to the development of Good Practice in this way.

The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project:
The BTC pipeline is 1,760km long and runs from Azerbaijan through Georgia to the Mediterranean coast of Turkey. At the time of its commencement, BTC was the largest crossborder infrastructure construction project in the world. The project faced a wide variety of complex and often difficult environmental and social challenges. Financing was agreed in February 2004 after more than two years of appraisal of the potential environmental and social impacts. Construction was completed in late 2005 and export from the new terminal in Ceyhan commenced in June 2006.
While it is impossible to capture all the challenges and complexities encountered during the design and construction phase of the BTC project, this publication focuses on six thematic areas where environmental and social lessons learned were thought to be most valuable and applicable to other IFC-financed projects.

External Monitoring of the Chad-Cameroon Pipeline Project
The Chad-Cameroon pipeline project is a US$3.5 billion development of an oil field in Chad by a consortium headed by ExxonMobil, and a 1,070 km long pipeline extending through Chad and Cameroon to the Atlantic coast. The External Compliance Monitoring Group (ECMG), funded and logistically supported by the Consortium, serves as the team responsible for auditing the implementation of the Consortium’s environmental and social commitments for this project. “External Monitoring of the Chad-Cameroon Pipeline Project: Lessons of Experience” provides lenders and project sponsors with an understanding of the business case for employing an external monitor, as well practical advice regarding the major steps and key issues for designing, implementing, and operating an external monitoring mechanism for complex projects. To highlight the practical challenges and value of the external monitoring mechanism, the publication draws illustrative examples from the experiences of IFC during the Chad-Cameroon pipeline Project.
PDF files can be downloaded at: http://www.ifc.org/enviropublications


Financial sector responsibility: The state of the art

October 30, 2006

The report discusses how greater transparency in implementing the Equator Principles can enable NGO’s to provide a fuller regulatory role, of this voluntary approach to Social and Environmental risk management.

The improved dialogue between NGOs and Financial Institutions that have been brought about through intitatives such as the Equator Principles.

The growing need to recognise that employees awareness of their personal accountability if growing, and employees are increasingly unprepared to compromise their ethics and standards in the workplace.

This special report is designed to offer the reader insights into how major institutions are responding to the sustainable development agenda. Also covered are increased expectations on business transparency and the role of regulators.

An interesting Case study discussed in the Report is the Baku-Tbilisi-Ceyhan (BTC) pipeline – which is now transporting oil from the Caspian Sea to the Mediterranean.

The $4 billion project showed how difficult it can be to address the social impacts of large infrastructure projects, such as the resettlement of local people and their compensation.
In Turkey, 300 villages were cleared during the building of the pipeline. Compensating villagers involved negotiating complex local laws – one piece of land was owned by 800 different people – and the fact that 70% of affected land owners had no legal right to compensation.
BP managed to compensate all land owners, but still there were disputes over what villagers were entitled to – for example, whether corn compensation was to be calculated at cost or market value, and over three years or just one. These disputes show how messy project finance can be on the ground.

The free PDF version of Ethical Corporation’s special 44-page report, Financial sector responsibility: The state of the art, is available to download at: www.ethicalcorp.com/fsr/